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Oracle continues to enrich the capabilities of its Hyperion suite of applications that support the finance function, but I wonder if that will be enough to sustain its market share and new generation of expectations.VI_Financialmanagement At the recent Oracle OpenWorld these new features were on display, and spokespeople described how the company will be transitioning its software to cloud deployment. Our 2013 Financial Performance Management Value (FPM) Index rates Oracle Hyperion a Warm vendor in my analysis, ranking eighth out of nine vendors. Our Value Index is informed by more than a decade of analysis of technology suppliers and their products and how well they satisfy specific business and IT needs. We perform a detailed evaluation of product functionality and suitability-to-task as well as the effectiveness of vendor support for the buying process and customer assurance. Our assessment reflects two disparate sets of factors. On one hand, the Hyperion FPM suite offers a broad set of software that automates, streamlines and supports a range of finance department functions. It includes sophisticated analytical applications. Used to full effect, Hyperion can eliminate many manual steps and speed execution of routine work. It also can enhance accuracy, ensure tasks are completed on a timely basis, foster coordination between Finance and the rest of the organization and generate insights into corporate performance. For this, the software gets high marks.

Unfortunately, this FPM suite remains more difficult to deploy and maintain than other vendors’ suites, and its user experience is becoming dated. As well, social collaboration is increasingly important in business, especially to fit specific requirements of the finance function, as I recently noted. Oracle understands that it must address changing user experience requirements as the baby boomers retire and are replaced by people who have fundamentally different expectations of how software is supposed to work. While there was plenty of evidence at OpenWorld that Oracle is taking steps to remedy this at a corporate level, it’s up to individual units to implement changes to their software portfolio, and it’s not clear that this is a priority for the Hyperion group. But in other areas, Oracle is busy addressing gaps in its FPM offerings. It is adding mobile enablement to Hyperion Financial Management and Planning, starting with an executive approval application to ensure that necessary signoffs can occur anywhere to speed the completion of routine work. To address the growing popularity of its cloud-based rivals, Oracle’s long-awaited Planning and Budgeting Cloud Service should be available by the end of 2013, providing budgeting, planning, collaborative forecasting and reporting as services to companies. And the company is offering financial and management and reporting in the cloud to streamline production and delivery of reports.

Hyperion still has the strongest franchise in the finance function, the legacy of achieving early market dominance in software for vr_fcc_financial_close_and_automationconsolidation, reporting, planning and budgeting. It succeeded because it gave the finance department autonomy from IT with applications designed by people who understood their needs. Hyperion offers a rich set of capabilities to automate the extended close cycle – all of the activities that start with the preclosing functions and continue through completion of external reporting. Our recent benchmark research on the financial close found a correlation between the time it takes a company to close and the degree of automation that it applies to the process. On average, those with a high degree of automation are able to close their books in 5.7 days, compared to 9.1 days for those that apply little or no automation. Oracle’s Financial Close Suite of applications is designed to enable companies to execute their period-end close faster and more accurately while requiring fewer resources. This is important because managing their close well is an issue for more than half of companies. Our research found that 61 percent of corporations take more than six business days to complete their quarterly or semiannual close (the consensus best practice is closing within six business days). Rather than achieving a faster close, which 83 percent of companies said is important or very important, the research found that on average it takes a day longer for companies to close than it took them five years earlier. In conjunction with better process design, using software to automate manual processes, manage all phases of process execution and limit the use of desktop spreadsheets is an effective way to shorten a company’s close cycle. Oracle’s Financial Management Analytics allows finance executives to closely monitor this extended close cycle.

One recent addition to Oracle Hyperion’s Financial Close Suite is Tax Provision. Accurately calculating and reporting direct (income) taxes is a time-consuming, labor-intensive process for almost all midsize and larger companies. I’ve written about the importance of using technology to bring the tax function into mainstream finance. There are two necessary IT elements to managing this process. One is ensuring that all of the data needed for provisioning and any subsequent audit is readily available. An option here is a tax data warehouse for companies that have a large number of legal entities and/or operate in multiple tax jurisdictions. Hyperion doesn’t have this capability. However, for companies that have less complex requirements or just want to simplify and centralize the gathering of tax data, it provides the second necessary element: an environment that manages tax data collection, improves the accuracy of the data and the calculations (by substantially reducing the need for desktop spreadsheets and rekeying of data from source systems) and automates data movement through configurable wizards. Especially in the quarterly and year-end accounting closes, numerous adjustments may take place that can affect the tax provision or changes in tax calculations that can have an impact on reported results. A tax provision application can speed up the back-and-forth adjustments, helping to shorten the accounting close cycle. It also can enhance the effectiveness of the tax function because those professionals will have more time to spend on analysis and optimizing a company’s tax position rather than wrestling with spreadsheets.

Oracle has added important new capabilities to its FPM suite since acquiring Hyperion. Expanding the suite has helped the company sustain its franchise in the face of determined competition from large to smaller sized software vendors such as IBMInfor and SAP, as well as smaller ones including Adaptive PlanningAnaplanHost AnalyticsLongview and Tagetik. The generational change that’s under way in corporations poses a serious competitive threat to Oracle. For finance professionals, word of mouth and brand loyalty count far more than “enchanted boxes” or “undulations”: That’s how Hyperion came to dominate the market. But times change, and Oracle is vulnerable because of the time and cost of deployment, ease of use and maintenance and user experience of its FPM suite. These were reflected in our 2013 Financial Performance Management Value Index. This year’s OpenWorld demonstrated that Oracle can pivot – albeit slowly – to address a rapidly evolving applications software market. With Hyperion it needs to focus more on addressing core competitive issues if it expects to sustain a leading market position.

Regards,

Robert Kugel – SVP Research

One of the community groups to which I donate my time is an organization that puts on a Concours d’Élegance – a vintage car show. Such Concours date back to seventeenth-century France, when wealthy aristocrats gathered to see who had the best carriages and most beaudacious horses. Our Concours serves as the centerpiece to a broader mission of raising money for several charities. There a many such events in the United States and elsewhere, but this one, which has been held every year since 1956, has the distinction of being the longest continuously running Concours in the United States.

A couple of years ago I started helping out on the day of the event, but soon I was in charge of registering and keeping track of the 250 or so cars that apply to be in the show. The spreadsheet-based system for keeping track of the cars was a mess, and it was the root cause of many (if not most) of the needless headaches that we were experiencing running the event. I wound up with the job because (following my own advice) I suggested that we change from spreadsheets to a real database, and I developed its design. At the same time we also changed from an all-paper registration system to an online one in order to reduce the need for volunteers to key in information from forms. This has substantially reduced errors associated with the data entry process. As a bonus, because we have all the information stored electronically, the members of the committee that selects the cars to appear now use tablets to review applicants rather than passing around paper forms and photographs.

The new system has streamlined many of our basic processes and cut down on errors, but it has not been without challenges. One is that owners of older cars tend to be older themselves, and some have limited or no experience using computers, and little or no interest in learning how to deal with email and the Internet. Even though we offer the option of filling out a paper entry form and attaching photographic prints, our notifications go out by email and the payment process is handled online. Like many businesses, we have had to determine how best to work with members of the public (car owners in our case) who find our process an exasperating headache.

Managing the registration process also provides ongoing confirmation of the research that my colleagues and I perform on using information technology in business. To be sure, the issues I confront are trivial in comparison to those of a larger organization and very different in scope. Yet I can see the connection between shortcomings in process design or software capabilities and some problems that develop on the day of the event. Here are some the lessons I have learned over the past two years, all of which reinforce the best practices Ventana Research advocates.

The quality of your IT department is a key factor in business success. Our research finds that companies with a competent IT staff get better results from IT than those that have mediocre or worse talent. In our Concours we found that to be true. To bring the registration online, we worked with a company that has an online scheduling service. The owner of the business is a Concours volunteer and a generous supporter. He donated the cost of his employees’ time, and we piggyback on his infrastructure. This works out well because his basic system was well suited to be modified to our very limited requirements.

The project involved creating a one-page web form that populated a couple of tables. I had defined all the fields in the tables along with their properties. We did not need the company to create and refine reports because we were linking Microsoft Access to the source tables and using it for reporting. We only needed the company to do the coding of our online form and create the underlying SQL tables.

We started developing the online registration system and database for keeping records two years ago in early November with the expectation that we would be ready for testing at the end of January. I thought this would give us plenty of time to begin accepting entries beginning in May. I figured the schedule was realistic, even though our project was a low priority for the staff because it was at most a one-week job. Unfortunately, the schedule turned out to be optimistic because the guy responsible for doing the work was incompetent. Instead of being ready in January, we went online with very limited testing in mid-June, three months late and six weeks after our announced starting date. While waiting, we had to constantly deal with owners who wanted to enter their cars. In the shortened registration process, we had to contend with a more concentrated load of questions, exceptions and errors. Despite all of the pain, I had to smile because our little project was almost a parody of the typical horror story of a major IT effort gone wrong. IT projects can fail for many reasons, but a competent, dedicated IT organization will overcome obstacles and promote business success.

Business leaders should be able to speak IT. Few business schools teach IT skills to prospective executives. Some businesses like to cross-train promising employees so that when they are promoted to senior-level positions they will have had the experience to understand most if not all of the facets of the business at an elemental level. They are in a better position to see how the issues in one part of the business affect things in others, and so are better able to deal with issues as they arise. Such experience also enables them to challenge excuses from people who are not getting the work done. In our case I can easily imagine being told the delay was the result of a change in scope, flawed software, negligent consultants – anything but the IT department staff. Line-of-business executives should know something about IT and IT department operations (or at least have someone on their staff who does). Without such knowledge, they will hear lame excuses that they don’t know enough to challenge, and have no ability to communicate clearly and quickly to overcome IT-related issues.

Bad data doubles workloads. OK, I made up that number, but I doubt it’s way off the mark. We collectively spend about half the time we spent two years ago collecting, correcting, organizing and using data about the cars and their owners. We are able to generate accurate, up-to-date reports in a matter of minutes. I fear that this lesson is often lost in corporate settings. Managers and executives often have only a limited idea of how much time is wasted in their organizations by needless and fixable issues. Good data stewardship is critical to the smooth functioning of all businesses, big and small, as I recently noted. Having good data yields a positive result: We were able to let the selection committee review the cars on tablets. This speeded up the process, and enabled members to easily jump back to compare entries and zoom in on photographs of cars and their engine compartments.

Root cause analysis and continuous improvement should be your mantra. We had many fewer issues in this our second year of operating the online system, but I still see improvements we could make to improve process efficiency and reduce the number of errors. When I find issues in our processes I try to determine their root cause. If it’s data- or technology-related, I try to figure out how to fix it. If it’s a process issue, I try to see whether an IT element might help the process along.

My major project for this coming year will be to deploy the Eclipse BIRT open source reporting tool for the Concours. We have users who need up-to-the-minute reports as we get close to the day of the event, and require write-back capability to correct database errors. I’m trying to follow our advice to use desktop spreadsheets where they are appropriate (and they are sometimes) but avoid them when they ultimately create more problems than they solve. A substantial portion of this year’s data issues started with desktop spreadsheets.

Sometimes a simple condition makes it easier to demonstrate larger principles that are at work in a more complex situation. In this case, keeping track of cars and their owners demonstrates the importance of using the right tools to efficiently achieve good data management. This example illustrates the importance of having the right people doing the job, and the importance of continually looking for root causes of business issues and finding ways to address them.

Regards,

Robert Kugel – SVP Research

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